Ese FIN3300-003 FALL 2018 TEST 1 Part IIl: Comprehensive Problems (50 points) Problem 1: John and Daphne are saving for their daughter Ellen's college (at t- o), and she will be entering college now (at education. Ellen just turned 10 8 years from now (at t-8). College tuition and expenses at niversity are currently $14,500 a year, but they are expected to increase at a rate of 3.5% a year. or wants to go to graduate school, she will be on her have to support the grad school delusions of their children!!). Tuition and other Culver U Ellen should graduate in 4 years--if she takes longer costs will be due at the end of each school year (att 8,9, 10, and 11). So , n and Daphne have accumulated S 12,000 in their college savings account that earns 55% (att. O). Their long-run financial plan is to add an additional $5,000 in each of the next 4 years that will eam 1 1 % (at t-1, 2, 3, and 4). Then they plan to make 3 cqual annual contributions in each of the following years, t-5, 6, and 7. They expectthis investment account to earn 9%. How large must the annual payments at t-5,6, and 7 be to cover Ellen's anticipated college costs? 1. Determine the cost of each year during college (Hint: college happens at t-8, 9, 10, I1)? 2. What will be the presentate of college tuition right before Ellen start school? Use VY-8.5% (Hint, caleulate the net present value of the uneven cash lows from QI discounted back tot-7, so each cashflow is discounted with N-t-7)